Will Cash Disappear?
Will Cash Disappear?Cash is unlikely to go away soon. Coins and paper currency remain the most popular ways to pay for things in most countries. However it is very costly for governments to manage and keep their fiat currency secure as counterfeiters are becoming more able to copy bank notes and put counterfeit notes into circulation which cost countries more and more every year. With this counterfeiting and the rise of electronic payments growing year over year, does it mean the end to our wallets and purses?
There are few corners of the world where electronic transactions are not growing faster than cash. The consulting firm Capgemini recently estimated that electronic payments will grow about 10.9 percent a year between 2015 and 2020. Yet the movement away from cash is happening in very different ways and at varying paces around the globe. For example:
The benefits of moving away from cash have been trumpeted by economists like Kenneth Rogoff, who wrote “The Curse of Cash,” about how paper money enables crime and tax evasion. But the critics of cash have been met by their own critics, who argue that electronic payments can disenfranchise poor people who lack easy access to bank accounts and the internet can make it much easier for governments and corporations to monitor a person’s every step.
Scandinavian countries are already well along the road toward a cashless society. Many banks in Sweden no longer have cash on hand, and consumers can make instant transfers directly from their bank accounts to retailers online or in store.
In Kenya the local mobile phone company Safaricom, not the banks or the government, has pushed the envelope. Safaricom created a system, known as M-Pesa that allows customers to make payments directly from their phones.
China is the most talked-about location in the battle between cash and electronic payments. PayPal-like wallets created by Chinese online giants Alibaba and Tencent have become the most popular ways to pay for things online.
The future of money is less likely to be determined by these arguments than to be shaped by the success of technologists making it easier for you to pay for your lunch or morning coffee without pulling out your wallet. Technology is revolutionizing money and payments. But we won’t end up with a system that’s fairer, more democratic and sustainable unless we design it that way.
With innovations like contactless cards, mobile payments and digital currencies gaining popularity, there are now a myriad of different ways to pay. This raises big questions about who has control over this essential function of our financial system, and who has access to it. The move to electronic payments means that more and more we have to rely on private financial institutions to access our money. While notes and coins are created and supplied under the bank’s supervision, these amounts are clearly your property when in your possession. Whereas the money in your current bank account exists only as numbers on a computer screen and is legally the property of your bank… or in the Bank’s possession. Leaving the payments system in the hands of big banks means that we’re all at risk from their lending activities, and banks sometimes have to be propped up by the taxpayer to avoid economic collapse or extreme devaluation (i.e., Cyprus financial crisis). People who don’t have access to bank accounts are excluded from this risk but also the financial opportunities that could be gained from investments etc.
Studies of other nations tie in with these findings:
In the UK, half the transactions by consumers in 2013 were with cash, according to a report released in May by the UK Payments Council (now known as Payments UK). “The current forecast is that this figure will drop below 50% next year (2016), but there is no prediction for cash to disappear,” reports tell us.
The Netherlands is an interesting case study to look at more closely because their retail sector has recently embraced card payments in a big way. There are now 1,400 supermarkets in the Netherlands with registers that don’t accept cash. As a result, card payments in the Netherlands have been growing by about 8% annually over the past few years. And yet, cash is still king. In 2012, there were 2.7 billion card payments, but an estimated 3.5 to four billion payments were made with cash. Even in supermarkets which all accept debit cards, cash is still used heavily, for the time being we think cash will keep on having an important role.
Perhaps cash’s sticking power has something to do with our strange tangible relationship with notes and coins. As with most of our decisions and preferences, our affinity for cash isn’t entirely rational. People value cash differently than they value electronic money, even though the two have the exact same value.
Psychologist Eric Uhlmann, from the Paris School of Management, has done a handful of studies that picked apart how differently people feel about different kinds of money. “I’m interested in human intuition and economic irrationalities,” he says. “There’s this sort of irrational feeling that if money is physical, it’s more yours, and you feel like you own it more. If you touch a dollar more, then that particular dollar becomes yours.”
Many who think about cash like to use Mark Twain’s quote: “the reports of my death are greatly exaggerated.” In one paper the authors compare cash to a kind of Cinderella: “It doesn’t have a mom or dad to watch over it – just those horrible stepsisters that try to convince Cinderella that she is ugly. But she isn’t” - they write. Cash is with us, and it will stay with us whether Bitcoin and PayPal advocates like it or not.
In the not too distant future you may take a self-driving car to work, or hologram into the office, and you may not even touch a piece of paper money. But you’ll likely still have a few notes and coins on hand somewhere, just in case. And you can be certain that somewhere in the world, somebody is pulling cash out of their pocket to buy something.
Whether your inkling is for cash or cryptocurrency or maybe you like to buy shares online, there is a mobile phone application now available that encompasses the whole financial range in one place, and it’s called WinstantPay. Its users are describing it as a revolution in personal finance and you can now download the app yourself! Find out more about WinstantPay here.
WinstantPay is a global payment network providing merchants and individuals a reasonably priced global final payment in an instant, in any currency, anywhere, anytime, with integrated anti-money laundering (AML) compliance that reduces time, costs, risks associated with payments. Serving financial institutions of all sizes for the last 18 years with financial services, software development, and business support, WinstantPay is also a founding member of WorldKYC-AML. For more information on how WinstantPay can deliver cutting edge business, visit our website and follow us on Linkedin, Medium, Twitter, Facebook, Medium, and Github.